An Employer Identification Number, or EIN for short, is a number that identifies a business entity to the IRS. It’s also known as an employer tax identification number. Your company needs one if you have any employees, pay taxes on your income, or are required to file certain information returns with the IRS. An EIN may be applied for online through the IRS website and will take about 30 minutes to process once submitted.
An employer identification number (EIN) is used by businesses in order to identify themselves with the Internal Revenue Service (IRS). The EIN number can be obtained online at irs.gov and it only takes about thirty minutes to process after submission of application form SS-4. The EIN is needed b yy organizations such as corporations, nonprofit organizations, partnerships, and trusts that have employees, operate a trade or business, or hold assets.
You will need an EIN under the following 5 circumstances:
1. If you operate a trade or business.
Starting a business in the United States is no easy feat. You need an EIN, or Employer Identification Number for your company to operate legally and tax efficiently with all its paperwork done on time every quarter.
Similarly, you’ll also need EIN if you’re are involved with any of the following types of organizations:
- nonprofit corporations
- associations that are federally formed under an Act of Congress
- common trust funds
- qualified subchapter S subsidiaries (QSubs)
- estates and trusts
- partnerships if at least two partners are taxable entities or estates and trusts
2. You pay employees.
If you have employees, the IRS requires you to file a W-4 for each new hire and an I-9 for each employee within three days of becoming hired. The W-4 is used for withholding allowances on federal income tax while the I-9 is used to verify that all your employees are legal workers in the country.
3. You file information returns for wages paid to employees or backup withholding.
You will need an EIN if you are required to file quarterly wage reports electronically via Form 941 or on paper Forms W-2 and W-3, among others. If you have any independent contractors working with your business, you will also need an EIN so that they are included as well when filing this report.
4. You have to pay taxes on your income.
If your business earns a certain amount of money per year, then you might be classified as a “large employer” by the IRS which means you’re mandated by law to set up a Simple Savings account called Allocated Spending Account (ASA).
5. You withhold taxes on income, other than wages, paid to a non-resident alien.
If you are withholding taxes on income other than wages, then you will need an EIN. This is especially applicable to non-resident aliens. Employers with foreign workers must withhold and pay the employer share of Social Security tax for certain employees who are working in the U.S.
Bottom line
You can apply to get your EIN number by downloading Form SS-4 or online through the IRS website. Remember, if you use the Form SS-4, you will need to submit it along with a few requirements needed to complete the application process. Please note that applying for your EIN using Form SS-4 may not be possible if any one or more of these apply to you:
• have a Keogh plan covering self-employed individuals;
• are a limited partner;
• are not in business for yourself if you have employees or have withholding requirements; or
• have a filing requirement for Form 5500, Annual Return/Report of Employee Benefit Plan.
